Despite a 2 percent increase in revenue compared to last year, Tesla’s profits have dropped by 45 percent year over year.
Tesla has released its second quarter earnings report, revealing $1.48 billion in net income on $25.5 billion in revenue. This represents a 2 percent increase from the $24.9 billion in revenue reported in Q2 2023 but a significant 45 percent drop in net income.
The company’s gross margins have come under scrutiny once more, with optimistic investors hoping for improvements after years of gradual decline. Aggressive price cuts, waning demand, and cheaper financing have driven Tesla’s previously impressive margins to their lowest level in six years.
The company reported 18 percent gross margins based on generally accepted accounting practices, a slight improvement from the 17.4 percent reported last quarter but a slight decrease from Q2 2023.
In its letter to shareholders, Tesla highlighted that “EV penetration returned to growth” globally, attributing this positive trend to improving customer sentiments.
“We believe that a pure EV is the optimal vehicle design and will ultimately win over consumers as the myths on range, charging, and service are debunked,” Tesla stated.
This announcement follows a better-than-expected delivery and production report earlier this month, which sent the company’s stock soaring. Despite producing and delivering 4.76 percent and 14 percent fewer vehicles, respectively, than a year ago, Tesla still exceeded Wall Street’s expectations, which had anticipated far worse numbers.
It has been a whirlwind quarter for Tesla. The company initially abandoned plans for a more affordable “Model 2” vehicle, only to recommit to it later. Elon Musk announced a robotaxi reveal event for August but subsequently delayed it until October. The company underwent a massive series of layoffs, including the entire Supercharger team, only to rehire many of those laid off. Tesla’s advanced driver-assist technology faced harsh scrutiny after a previous recall failed to prevent driver misuse. Additionally, Tesla shareholders approved a massive pay package for Elon Musk, after a judge had previously thrown out the first one.
Compounding these issues, Musk endorsed Donald Trump for president, placing Tesla in a politically charged environment that is likely to impact the company’s sales and brand reputation.